I'm a Fellow at the Adam Smith Institute in London, a writer here and there on this and that and strangely, one of the global experts on the metal scandium, one of the rare earths. An odd thing to be but someone does have to be such and in this flavour of our universe I am. I have written for The Times, Daily Telegraph, Express, Independent, City AM, Wall Street Journal, Philadelphia Inquirer and online for the ASI, IEA, Social Affairs Unit, Spectator, The Guardian, The Register and Techcentralstation. I've also ghosted pieces for several UK politicians in many of the UK papers, including the Daily Sport.

The Financial Times is reporting that Facebook is developing a Snapchat lookalike under the name of Slingshot. Something which leads to the thought that perhaps Snapchat made a ghastly mistake in rebuffing Facebook’s bid of $3 billion for the company. Our economic point here being that if you’ve got something that is easily replicable then if someone offers you $3 billion for it then perhaps you had better take the offer?

Facebook is said to be building a video-messaging app to rival the Snapchat messaging service.

The new app is known internally as Slingshot and could be launched this month, the Financial Times reported Sunday, citing people familiar with the work. A source told the newspaper that Facebook may yet decide not to move forward with the product.

Facebook said it “does not comment on reports based on rumors and speculation.”

Slingshot will allow users to exchange short video messages, the newspaper reported. It is meant to compete directly with Snapchat, a popular messaging app that allows its users to snap a quick photo or video that will disappear after being viewed.

The rejection of that offer is still only possibly a mistake of course. For it depends upon which of the attributes that Snapchat has that Facebook is able to copy.

In the background here is our basic theory about why we even have patents and copyrights at all. We rather like that people keep exerting themselves to invent and innovate new things for us all to enjoy. and we’re also aware that at least some of those inventors and innovators are motivated by money to do that work. Not all, but at the margin certainly some. However, a great deal of such invention and innovation is copyable. Once someone’s found that new method of doing something then the knowledge that this works is out there and so people will copy it. This makes it very difficult to make money from invention and thus fewer of those people motivated by cash do so. To our detriment as we get fewer people inventing new things for us to enjoy. Thus we invent intellectual property so as to protect the ability to make money and thus increase innovation.

In this particular case Snapchat does have copyright over its own code. But they don’t have protection of any sort on the basic idea of disappearing selfies and the like. This is why Facebook can copy them (if indeed they are) and so Snapchat is in the position that all inventors would be if our various protections did not exist. Which is that having invented, having found that their invention is very popular indeed, they’re being copied and there’s little they can do about it.

All of which means that we might think of their rejection of Facebook’s takeover offer was a ghastly mistake. Better to get bought out for $3 billion perhaps than to be competed out of business a year later. However, we’re still at the possibly this was a mistake stage here. For there are two things that Snapchat has, not just the one. There is that disappearing selfie thing, yes, which is what seems to have driven its first adoption. But now it has network effects working for it: there’s tens of millions using it. That has significant value all of its own and we’re not seeing any move away from it. Far from it in fat, teachers have been complaining that the recent update to the software caused more disruption in classrooms than perhaps anything else they’ve seen. So Snapchat has, for the moment, at least, a loyal and expanding user base.

Facebook might be able to copy the functionality, but are they going to be able to capture that user base? If they cannot then Snapchat perhaps didn’t make a mistake: if they can then we might think that they did.

There’s a certain amusement in that if Snapchat succeeds in retaining its user base then that will be a certain disproof of our contention that innovators need legal protection for their inventions. For if their network effects are sufficient to enable them to thrive without said legal protections then perhaps, at least in some areas, we don’t need those legal protections for innovation to thrive? It’s going to be interesting seeing which way this all ends up.

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So, I think this is pretty obvious, but Facebook clearly will benefit more largely from network effects than Snapchat does. It has many, many more users.

What should also be identified is that not only did Snapchat make a stupid mistake in turning down $3b without a better offer on the table, Facebook also made a mistake by offering it in the first place. I would be willing to wager quite a large sum even at steep odds that Facebook will spend less than $3b to develop their new app. In fact, I’d be shocked if they even spent 1% of that amount.